Genentech Insiders Sell Bid-Up Stock

THE CHAIRMAN AND seven other insiders at a leading biotechnology company have exercised options and sold more than 750,000 shares since Friday.

Arthur Levinson, chairman and chief executive of
Genentech,
has exercised options and sold 200,000 shares, according to a Securities and Exchange Commission filing. Levinson exercised options at about $12 per share before turning around and selling the stock at market prices close to $67.50.

Some other Genentech insiders who recently sold shares include the company's chief financial officer, general counsel and the presidents of product

development and commercial operations.

Trading at 71.00, Genentech shares have increased 61% since early March when company officials announced its cancer drug Avastin improved the survival rate among lung cancer patients in late-stage trials. On Friday company officials announced that Avastin also improved survival for breast cancer patients in late-stage trials.

Mark LoPresti, a senior quantitative analyst with Thomson Financial, suggests that Genentech insiders are taking advantage of the stock's recent surge to take some profits.

He adds that Genentech insiders, as well as insiders at other biotech companies, have a tendency to sell shares when they're trading higher than historical prices.

"Most of these people have been at the company a long time, and they've waited a long time" for good news, LoPresti says. "I would be surprised if they didn't take stock off the table when shares were up at every chance they got."

A Genentech spokeswoman declined to comment on the personal financial planning strategies of company insiders.

Geoff Porges, an analyst with Bernstein Investment Research and Management, notes that insiders could be selling shares because there may be little upside left in the stock. Porges, who has placed a $65 price target on Genentech shares, says the stock will require significant good news to move up any further.

"Part of the reason you're seeing the insider selling is that the really important news, at least for the short term, is already on the table," he says. "So, it's hard to recommend to institutional investors to buy the shares at this price."

Porges says Genentech's shares, which trade at about 60 times earnings for the next four quarters, are a bit pricey. He points out that the market is acquiring a bearish attitude that could discourage investors from high-flying stocks.

"I don't anticipate material negative news for Genentech," he says. "But, if we continue in this pessimistic market, then I think stocks with extremely high multiples like this will find it hard to sustain them."

Here's a rundown of insider trading activity reported on April 20, 2005. An insider is any officer, director or owner of 10% or more of a class of the company's securities. The table shows purchases and sales which must be reported to the SEC and other regulators by the 10th of the month following the month of the trade, includes both open-market and private transactions involving direct and indirect holdings. Excludes stock valued at less that $2 per share, acquisitions through options and companies being acquired. Included are purchases, sales and stock registered for sale for individual officers, companies, and sectors.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.